Wall Street Journal: Wave of Bankruptcy Filings Expected from Retailers in Wake of Holidays

If it wrong to be openly rooting for retail bankruptcies just so my predictions of the past year and a half come to fruition? [Dec 2007: Credit Downturn Hits Malls]

My latest round on the retail front, was a quite over the top outlier of 5 major brand names to go out by Memorial Day [Dec 16: 13 Outlier 2009 Predictions] I see Goody's Family Clothing has already filed but since that's not a national name brand I won't count it.

• Goody's Family Clothing Inc. (GDYS) is liquidating operations, becoming the first high-profile retailer to go under in a new year that is expected to see many more going-out-of-business announcements. Goody's has about 9,000 employees and operates 282 small department stores in about 20 states, mainly in strip malls in the Southeastern and Midwestern U.S.
• As recently as early November, White told the Knoxville News Sentinel that Goody's expected to turn a profit by the end of the year. (loud sigh)

So we'll add Goody's to

1. Circuit City [Nov 10: McDonalds Strong, Circuit City Out]
2. Mervyn's [Jul 21: Add Mervyn's to our Growing Litany of Retailers Headed to the Great Sunset]
3. Steve n Barry's [Jul 10: Another Retailer (Canary in Coal Mine Down]
4. Linen's n Things [Apr 11: This Day in Bankruptcies - Another Airline and our First Major Retailer]

I'm sure I forgot someone as strip and non strip malls across the country begin to empty... and we're not even touching on the restaurants [Jul 30: Bennigan's, Stake & Ale Close - File for Bankruptcy Protection]

It's time to "right size" retail space in America.... [Sep 20: US News & World Report - The End of the Shopaholic Nation?]

Via the Wall Street Journal

• Drained by the worst consumer-spending slump in decades and burdened by debt, U.S. retailers are expected to begin a wave of post-holiday bankruptcy filings, altering the landscape at malls and on main streets across the country. Retailers are particularly vulnerable in the current downturn after a decade of buoyant consumer spending, which encouraged them to overexpand and overborrow.
• Several of the industry's biggest lenders, including General Electric Co.'s GE Capital, CIT Group Inc. and Wachovia Corp., are tightening lending terms and reducing exposure to retailers. Their tougher terms are making it harder for retailers to find capital to reorganize under bankruptcy-court protection, as they were able to do in the past, meaning there are likely to be more liquidations.
• According to ratings company Standard & Poor's, nine U.S. retailers and restaurants, including off-price apparel chain Loehmann's Holdings Inc., drugstore operator Duane Reade Holdings Inc. and jeweler Finlay Enterprises Inc. are at significant risk of default, with junk-bond ratings of CCC, or "very weak."
• Along with Finlay, which operates Bailey Banks & Biddle jewelry stores, bankruptcy experts think regional department-store chains Bon-Ton Stores Inc. and Gottschalks Inc. and fashion-accessories retailer Claire's Stores Inc. may be under the most stress.

The rest of the story deals with the chains mentioned denying there is any issue - sort of like the infamous appearance by Bear Stearns CEO on CNBC the day before they went to the Federal Reserve on hands and knees.... or Goody's saying they would be profitable in November (and in under 2 months filing bankruptcy)

The one plus side is the stores that are still around when we exit this era should face a lot less competition. Thankfully the (ahem) rip roaring economy of the "2nd half 2009" should make all the pain go away so next Christmas is nothing like this Christmas. Yep - that's what the pundits tell me.

[Dec 18: CNNMoney: The Dead Mall Problem]
[Nov 27: AP - Malls, Hotels Next Victims in New Mortgage Crisis]
[Oct 18: CNNMoney: Mall's Demise Could Doom Communities]
[Jul 5: Bloomberg: Teenagers Skip $50 Jeans in Squeeze of Gas, Job Shortage])